10-Q 1 box-20221031.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2022

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-36805

 

Box, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

20-2714444

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

900 Jefferson Ave.

Redwood City, California 94063

(Address of principal executive offices and Zip Code)

(877) 729-4269

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, $0.0001 par value 
per share

 

BOX

 

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YesNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Small reporting company

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesNo

As of November 30, 2022, the number of shares of the registrant’s Class A common stock outstanding was 142,914,809.

 

 

 


 

TABLE OF CONTENTS

 

 

 

PART I – FINANCIAL INFORMATION

 

Page

Item 1.

 

Financial Statements (Unaudited)

 

5

 

 

Condensed Consolidated Balance Sheets as of October 31, 2022 and January 31, 2022

 

5

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended October 31, 2022 and 2021

 

6

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended October 31, 2022 and 2021

 

7

 

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' (Deficit) Equity for the Three and Nine Months Ended October 31, 2022 and 2021

 

8

 

 

Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended October 31, 2022 and 2021

 

10

 

 

Notes to Condensed Consolidated Financial Statements

 

11

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

34

Item 4.

 

Controls and Procedures

 

35

 

 

PART II – OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

36

Item 1A.

 

Risk Factors

 

36

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

59

Item 6.

 

Exhibits

 

60

 

 

Signatures

 

61

 

 


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

our future financial and operating results, including expectations regarding revenue, deferred revenue, billings, remaining performance obligations, gross margins, operating income, and net retention rate;
our ability to maintain an adequate rate of revenue and billings growth and our expectations regarding such growth;
our market opportunity, business plan and ability to effectively manage our growth;
our ability to achieve profitability and expand or maintain positive cash flow;
our ability to achieve our long-term and short-term gross and operating margin objectives;
our ability to grow our remaining performance obligations;
our expectations regarding our revenue mix;
our ability to maintain, protect and enhance our brand and intellectual property;
costs associated with defending intellectual property infringement and other claims and the frequency of such claims;
our ability to attract and retain end-customers;
our ability to further penetrate our existing customer base;
our ability to displace existing products in established markets;
our expectations regarding timing of new products, product bundles and features;
our ability to expand our leadership position as a cloud content management platform;
our ability to timely and effectively scale and adapt our existing technology;
our ability to innovate new products and features and bring them to market in a timely manner and the expected benefits to customers and potential customers of our products;
our investment strategy, including our plans to further invest in our business, including investment in research and development, sales and marketing, our data center infrastructure and our professional services organization, and our ability to effectively manage such investments;
our ability to expand internationally;
expectations about competition and its effect in our market and our ability to compete;
the effects of seasonal trends on our operating results;
use of non-GAAP financial measures;
our belief regarding the sufficiency of our cash, cash equivalents and our credit facilities to meet our working capital and capital expenditure needs for at least the next 12 months;
our expectations concerning relationships with third parties;
our ability to attract and retain qualified employees and key personnel;
our ability to realize the anticipated benefits of our partnerships with third parties;
the effects of new laws, policies, taxes and regulations on our business;
management’s plans, beliefs and objectives, including the importance of our brand and culture on our business;
our ability to maintain, protect and enhance our brand and intellectual property;

3


 

acquisitions of or investments in complementary companies, products, services or technologies and our ability to successfully integrate such companies or assets;
the KKR-led investment in Box and achievement of its potential benefits;
any potential repurchase of our Class A common stock;
the potential impact of shareholder activism on Box’s business and operations;
the effects of global economic conditions to our business;
the impact of the Russian invasion of Ukraine on our business and operating results; and
the impact of public health epidemics or pandemics, such as the COVID-19 pandemic, and governmental responses thereto.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations, except as required by law.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the SEC as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

4


 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

BOX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

 

 

October 31,

 

 

January 31,

 

 

 

2022

 

 

2022

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

358,060

 

 

$

416,274

 

Short-term investments

 

 

44,567

 

 

 

170,000

 

Accounts receivable, net

 

 

176,593

 

 

 

256,312

 

Deferred commissions

 

 

46,120

 

 

 

46,025

 

Other current assets

 

 

31,187

 

 

 

27,953

 

Total current assets

 

 

656,527

 

 

 

916,564

 

Property and equipment, net

 

 

67,755

 

 

 

105,755

 

Operating lease right-of-use assets, net

 

 

142,147

 

 

 

172,808

 

Goodwill

 

 

70,702

 

 

 

74,466

 

Deferred commissions, non-current

 

 

69,251

 

 

 

72,884

 

Other long-term assets

 

 

50,068

 

 

 

49,532

 

Total assets

 

$

1,056,450

 

 

$

1,392,009

 

LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable, accrued expenses and other current liabilities

 

$

45,552

 

 

$

58,942

 

Accrued compensation and benefits

 

 

32,451

 

 

 

54,705

 

Finance lease liabilities

 

 

31,175

 

 

 

41,235

 

Operating lease liabilities

 

 

46,203

 

 

 

44,608

 

Deferred revenue

 

 

442,015

 

 

 

519,485

 

Total current liabilities

 

 

597,396

 

 

 

718,975

 

Debt, net, non-current

 

 

368,878

 

 

 

367,463

 

Operating lease liabilities, non-current

 

 

131,143

 

 

 

168,192

 

Other long-term liabilities

 

 

37,193

 

 

 

44,586

 

Total liabilities

 

 

1,134,610

 

 

 

1,299,216

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Series A convertible preferred stock, par value of $0.0001 per share; 500 shares (unaudited) authorized, issued and outstanding as of October 31 and January 31, 2022

 

 

489,434

 

 

 

487,880

 

Stockholders’ deficit:

 

 

 

 

 

 

Class A common stock, par value $0.0001 per share; 1,000,000 shares authorized; 142,915 shares (unaudited) and 145,081 shares issued and outstanding as of October 31 and January 31, 2022, respectively

 

 

14

 

 

 

15

 

Additional paid-in capital

 

 

802,534

 

 

 

972,020

 

Accumulated other comprehensive loss

 

 

(13,817

)

 

 

(4,543

)

Accumulated deficit

 

 

(1,356,325

)

 

 

(1,362,579

)

Total stockholders’ deficit

 

 

(567,594

)

 

 

(395,087

)

Total liabilities, convertible preferred stock and stockholders’ deficit

 

$

1,056,450

 

 

$

1,392,009

 

 

See notes to condensed consolidated financial statements.

5


 

BOX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

October 31,

 

 

October 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue

 

$

249,951

 

 

$

224,044

 

 

$

734,398

 

 

$

640,971

 

Cost of revenue

 

 

64,490

 

 

 

63,069

 

 

 

191,542

 

 

 

184,804

 

Gross profit

 

 

185,461

 

 

 

160,975

 

 

 

542,856

 

 

 

456,167

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

59,107

 

 

 

55,837

 

 

 

182,805

 

 

 

159,418

 

Sales and marketing

 

 

81,566

 

 

 

76,368

 

 

 

248,075

 

 

 

218,967

 

General and administrative

 

 

31,422

 

 

 

39,857

 

 

 

94,846

 

 

 

105,242

 

Total operating expenses

 

 

172,095

 

 

 

172,062

 

 

 

525,726

 

 

 

483,627

 

Income (loss) from operations

 

 

13,366

 

 

 

(11,087

)

 

 

17,130

 

 

 

(27,460

)

Interest and other expense, net

 

 

(1,427

)

 

 

(2,336

)

 

 

(6,235

)

 

 

(8,275

)

Income (loss) before provision for income taxes

 

 

11,939

 

 

 

(13,423

)

 

 

10,895

 

 

 

(35,735

)

Provision for income taxes

 

 

2,031

 

 

 

438

 

 

 

4,641

 

 

 

1,399

 

Net income (loss)

 

$

9,908

 

 

$

(13,861

)

 

$

6,254

 

 

$

(37,134

)

Accretion and dividend on series A convertible preferred stock

 

 

(4,278

)

 

 

(4,301

)

 

 

(12,804

)

 

 

(8,086

)

Undistributed earnings attributable to preferred stockholders

 

 

(648

)

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common stockholders

 

$

4,982

 

 

$

(18,162

)

 

$

(6,550

)

 

$

(45,220

)

Net income (loss) per share attributable to common stockholders, basic and diluted

 

$

0.03

 

 

$

(0.12

)

 

$

(0.05

)

 

$

(0.29

)

Weighted-average shares used to compute net income (loss) per share attributable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

142,385

 

 

 

151,426

 

 

 

143,604

 

 

 

158,068

 

Diluted

 

 

148,127

 

 

 

151,426

 

 

 

143,604

 

 

 

158,068

 

 

 

See notes to condensed consolidated financial statements.

6


 

BOX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

October 31,

 

 

October 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

 

$

9,908

 

 

$

(13,861

)

 

$

6,254

 

 

$

(37,134

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Net foreign currency translation loss

 

 

(3,390

)

 

 

(1,754

)

 

 

(10,986

)

 

 

(2,730

)

Other

 

 

806

 

 

 

452

 

 

 

1,712

 

 

 

754

 

Other comprehensive loss

 

 

(2,584

)

 

 

(1,302

)

 

 

(9,274

)

 

 

(1,976

)

Comprehensive income (loss)

 

$

7,324

 

 

$

(15,163

)

 

$

(3,020

)

 

$

(39,110

)

 

See notes to condensed consolidated financial statements.

7


 

BOX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY

(In thousands)

(Unaudited)

 

 

 

Three Months Ended October 31, 2022

 

 

 

Series A Convertible
Preferred Stock

 

 

 

Class A Common
Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balance as of July 31, 2022

 

 

500

 

 

$

488,906

 

 

 

 

142,320

 

 

$

14

 

 

$

797,948

 

 

$

(11,233

)

 

$

(1,366,233

)

 

$

(579,504

)

Issuance of common stock under employee equity plans, net of shares withheld for employee payroll taxes

 

 

 

 

 

 

 

 

 

1,699

 

 

 

 

 

 

(5,132

)

 

 

 

 

 

 

 

 

(5,132

)

Stock-based compensation related to stock awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43,159

 

 

 

 

 

 

 

 

 

43,159

 

Accretion and dividend on series A convertible preferred stock, net of dividends paid

 

 

 

 

 

528

 

 

 

 

 

 

 

 

 

 

(4,278

)

 

 

 

 

 

 

 

 

(4,278

)

Repurchases of common stock

 

 

 

 

 

 

 

 

 

(1,105

)

 

 

 

 

 

(29,163

)

 

 

 

 

 

 

 

 

(29,163

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,584

)

 

 

 

 

 

(2,584

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,908

 

 

 

9,908

 

Balance as of October 31, 2022

 

 

500

 

 

$

489,434

 

 

 

 

142,914

 

 

$

14

 

 

$

802,534

 

 

$

(13,817

)

 

$

(1,356,325

)

 

$

(567,594

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended October 31, 2021

 

 

 

Series A Convertible
Preferred Stock

 

 

 

Class A Common
Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balance as of July 31, 2021

 

 

500

 

 

$

488,894

 

 

 

 

152,660

 

 

$

15

 

 

$

1,193,003

 

 

$

(1,612

)

 

$

(1,344,393

)

 

$

(152,987

)

Issuance of common stock under employee equity plans, net of shares withheld for employee payroll taxes

 

 

 

 

 

 

 

 

 

2,057

 

 

 

1

 

 

 

(3,148

)

 

 

 

 

 

 

 

 

(3,147

)

Stock-based compensation related to stock awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40,827

 

 

 

 

 

 

 

 

 

40,827

 

Accretion and dividend on series A convertible preferred stock, net of issuance costs

 

 

 

 

 

4,272

 

 

 

 

 

 

 

 

 

 

(4,301

)

 

 

 

 

 

 

 

 

(4,301

)

Repurchases of common stock

 

 

 

 

 

 

 

 

 

(5,707

)

 

 

(1

)

 

 

(138,378

)

 

 

 

 

 

 

 

 

(138,379

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,302

)

 

 

 

 

 

(1,302

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,861

)

 

 

(13,861

)

Balance as of October 31, 2021

 

 

500

 

 

$

493,166

 

 

 

 

149,010

 

 

$

15

 

 

$

1,088,003

 

 

$

(2,914

)

 

$

(1,358,254

)

 

$

(273,150

)

 

 

See notes to condensed consolidated financial statements.

 

8


 

BOX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended October 31, 2022

 

 

 

Series A Convertible
Preferred Stock

 

 

 

Class A Common
Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balance as of January 31, 2022

 

 

500

 

 

$

487,880

 

 

 

 

145,081

 

 

$

15

 

 

$

972,020

 

 

$

(4,543

)

 

$

(1,362,579

)

 

$

(395,087

)

Issuance of common stock under employee equity plans, net of shares withheld for employee payroll taxes

 

 

 

 

 

 

 

 

 

7,166

 

 

 

 

 

 

(49,122

)

 

 

 

 

 

 

 

 

(49,122

)

Stock consideration in connection with fiscal 2022 acquisition

 

 

 

 

 

 

 

 

 

559